Mrs. Insiyah Abdul Hussein Rahim, Aurangabad V. Asst. CIT, Circle-2, Aurangabad

ITA 896/PUN/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9497 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 23-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUKULESH CHANDRA DUBEY
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.896/PN/2013 ASSESSMENT YEAR: 2008-09 MRS. INSIYAH ABDUL HUSSEIN RAHIM, 1 MAIMUM VILLA, PANCHAKKI ROAD, GHATI ROAD, AURANGABAD . APPELLANT PAN: ACSPR4879A VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 2, AURANGABAD . RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SHRI MUKULESH CHANDRA DUBEY, CIT DATE OF HEARING : 25-02-2015 DATE OF PRONOUNCEMENT : 27-02-2015 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT, AURANGABAD, DATED 12.03.2013 RELATING TO ASSESSMENT YEAR 2008-09 AGAI NST ORDER PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT, AURANGABAD IS NOT JUSTIFIED IN SETTING ASIDE THE OR DER OF THE ASSESSING OFFICER, ACIT CIRCLE-2 AURANGABAD DT.25/08/2010. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT, AURANGABAD HAS ERRED IN TREATING THE ASSESSMENT MAD E BY THE ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE HON'BLE CIT, AURANGABAD HAS NOT REALIZED THE FACT THAT THE ASSES SING OFFICER HAS MADE ASSESSMENT TAKING IN TO CONSIDERATION ALL THE FACTS AND FIGURES OF THE CASE INCLUDING THE RECORDS CALLED FOR VERIFICATION BY HI M. THE ASSESSING OFFICER HAS MADE THE ASSESSMENT AFTER CALLING THE REQUISITE INF ORMATION AS PER QUESTIONER WHICH WAS DULY VERIFIED BY HIM AND HE 'HAS MADE THE ASSESSMENT AFTER FULLY EXERCISING THE STATUTORY POWERS AND OBLIGATIONS CAS TED UPON HIM. 4. THE ASSESSEE HAS FURNISHED ALL DETAILS AND INFO RMATION BEFORE THE HON'BLE CIT RESPONDING TO THE LETTER OF PROPOSAL FOR ACTION U/S .263. THOUGH ALL THE QUARRIES RAISED BY THE CIT WERE EXPLAINED PROPERLY, EVEN THE Y THE CIT TREATED THE ORDER OF THE .ASSESSING OFFICER AS ERRONEOUSLY AND PREJUDICI AL TO INTEREST OF REVENUE AND SET ASIDE THE ASSESSMENT ARBITRARILY. ITA NO.896/PN/2013 MRS. INSIYAH ABDUL HUSSEIN RAHIM 2 5. IN VIEW OF THE ABOVE THE ORDER PASSED BY THE HON BLE CIT U/S.263 IS NOT SUSTAINABLE AND IS AGAINST THE SPIRIT OF PROVISION OF SEC. 263 OF THE I.T. ACT 6. THE APPELLANT CRAVES THE PERMISSION TO ADD, AMEN D, MODIFY, ALTER, REVISE, SUBSTITUTE, DELETE ANY OR ALL GROUNDS OF THE APPEAL , IF DEEMED NECESSARY AS THE TIME OF HEARING OF THE APPEAL. 3. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHA LF OF THE ASSESSEE NOR ANY APPLICATION FOR ADJOURNMENT WAS MOVED BY THE ASSESS EE. ON THE EARLIER DATE OF HEARING I.E. ON 17.11.2014, THE LEARNED AUTHORIZED REPRESEN TATIVE FOR THE ASSESSEE HAD APPEARED AND SOUGHT ADJOURNMENT. ACCORDINGLY, THE APPEAL HAS BEEN POSTED FOR HEARING TO THE APPOINTED DATE OF HEARING, ON WHICH DATE NON E APPEARED. ACCORDINGLY, WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. 4. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST THE INVOKING OF JURISDICTION UNDER SECTION 263 OF THE ACT. 5. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE WAS ENGAGED IN PROVIDING EDUCATIONAL SERVICES TO THE STUDENTS UNDER THE NAME AND STYLE TODDLERS NURSERY AT AURANGABAD. THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.8,55,860/- AND THE ASSESSMENT IN THE CASE WAS CO MPLETED UNDER SECTION 143(3) OF THE ACT AT A TOTAL INCOME OF RS.9,09,240/-. 6. THE COMMISSIONER ON THE PERUSAL OF ASSESSMENT RE CORD FOR THE RELEVANT YEAR WAS OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E, FOR WHICH, SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE. THE SHOW CAUSE NOTICE WAS REPRODUCED BY THE COMMISSIONER AT PAGES 1 AND 2 OF THE ORDER PASSED UNDER SECTION 263 OF THE ACT. THE FIRST ISSUE RAISED BY THE COMMISSIONER WAS IN RELATION TO THE TAX FREE INCOME RECEIVED BY THE ASSESSEE, WHICH WAS COVERED BY THE PROVISIONS OF SECTION 14A( 3) OF THE ACT. THE COMMISSIONER WAS OF THE VIEW THAT RULE 8D OF INCOME TAX RULES (I N SHORT RULES) WAS CLEARLY APPLICABLE TO THE CASE OF THE ASSESSEE. THE ASSESS EE FURNISHED WRITTEN SUBMISSIONS WHICH ARE REPRODUCED AT PAGE 3 OF THE ORDER PASSED UNDER SECTION 263 OF THE ACT. THE PLEA OF THE ASSESSEE WAS THAT THE INTEREST DEBITED TO THE PROFIT & LOSS ACCOUNT OF RS.2,00,663/- PERTAINED TO THE LOAN TAKEN FOR THE P URPOSE OF BUSINESS ACTIVITY OF PRIMARY SCHOOL AND NO INVESTMENTS WERE MADE OUT OF THE SAID LOAN. IN VIEW THEREOF, THE ITA NO.896/PN/2013 MRS. INSIYAH ABDUL HUSSEIN RAHIM 3 ASSESSEE OBJECTED TO THE DISALLOWANCE WORKED OUT BY THE COMMISSIONER IN SHOW CAUSE NOTICE UNDER RULE 8D OF THE RULES. THE COMMISSIONE R OBSERVED THAT OUT OF INTEREST FREE INCOME EARNED, DISALLOWANCE OF INTEREST UNDER SECTI ON 14A R.W.S. RULE 8D OF THE RULES WAS WARRANTED SINCE WHATEVER INVESTMENTS WERE MADE BY THE ASSESSEE WERE FROM BUSINESS INCOME AND NOT FROM THE PERSONAL INCOME. THE COMMISSIONER ALSO NOTED THAT THE INVESTMENTS OF THE ASSESSEE HAD INCREASED TO RS .22,50,667/- AS AGAINST RS.14,98,998/- SHOWN IN THE PREVIOUS YEAR. THE COM MISSIONER FURTHER HELD THAT WHERE ALL THE INCOME AND EXPENDITURE WAS RECEIVED / INCUR RED THROUGH A COMMON HUTCH POT, THE PROVISIONS OF RULE 8D OF THE RULES WERE CLEARLY APP LICABLE. RELIANCE IN THIS REGARD WAS PLACED ON VARIOUS DECISIONS AND THE MATTER WAS REST ORED BACK TO THE ASSESSING OFFICER FOR RE-CONSIDERATION ON THE FACTS. ANOTHER ISSUE R AISED IN THE SHOW CAUSE NOTICE WITH REGARD TO THE EXPENSES INCURRED TOWARDS TEACHING AI D WAS ACCEPTED BY THE COMMISSIONER AND NO INTERFERENCE WAS MADE TO THE OR DER OF ASSESSING OFFICER. 7. THE ASSESSEE IS IN APPEAL BEFORE US VIS-A-VIS T HE EXERCISE OF JURISDICTION UNDER SECTION 263 OF THE ACT, WHICH CAN BE EXERCISED WHER E THE ASSESSMENT ORDER PASSED IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE TWIN CONDITIONS PROVIDED UNDER SECTION 263 OF THE ACT I.E. THE ORDER BEING E RRONEOUS AND BEING PREJUDICIAL TO THE INTEREST OF REVENUE ARE TO BE SATISFIED SIMULTANEOU SLY AND IN CASE, WHERE ONE OF THE CONDITIONS IS NOT SO SATISFIED THEN, THE COMMISSION ER IS NOT EMPOWERED TO EXERCISE THE JURISDICTION UNDER SECTION 263 OF THE ACT. IN THE FACTS OF THE PRESENT CASE, WHERE THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) OF THE ACT, THE COMMISSIONER ON EXAMINATION OF RECORDS NOTED THAT THE ASSESSEE H AD EARNED CERTAIN EXEMPT INCOME I.E. PROFIT ON REDEMPTION OF MUTUAL FUNDS OF RS.1,1 3,361/-, PPF INTEREST OF RS.6,978/-, DIVIDEND ON MUTUAL FUNDS OF RS.2,52,721/-, RS.1,288 /- AND RS.30,000/-. THE ASSESSEE WAS MAINTAINING A BANK ACCOUNT, WHERE BOTH THE BUSI NESS FUNDS AND THE PERSONAL INCOME WERE BEING DEPOSITED. THE COMMISSIONER NOTE D THAT FROM THE SAID COMMON BANK ACCOUNT, WHERE BUSINESS RECEIPTS WERE BEING DE POSITED, THE ASSESSEE HAD ALSO MADE INVESTMENT IN TAX FREE SECURITIES. FURTHER, T HE ASSESSEE HAD ALSO RAISED LOAN ON WHICH, HAD CLAIMED INTEREST EXPENDITURE OF RS.2,00, 663/-. IN VIEW OF COMMON MIXED FUNDS, THE CASE OF THE COMMISSIONER WAS THAT THE PR OVISIONS OF SECTION 14A R.W.S. 8D OF RULES WERE TO BE APPLIED IN ORDER TO WORK OUT THE D ISALLOWANCE ON ACCOUNT OF ITA NO.896/PN/2013 MRS. INSIYAH ABDUL HUSSEIN RAHIM 4 EXPENDITURE INCURRED ON INTEREST AND ADMINISTRATIVE EXPENSES BEING RELATABLE TO THE EXEMPT INCOME EARNED BY THE ASSESSEE. 8. THE CLAIM OF THE ASSESSEE ON THE OTHER HAND, WAS THAT THE INTEREST DEBITED TO THE PROFIT & LOSS ACCOUNT OF RS.2,00,663/- PERTAINED TO THE LOAN TAKEN FOR THE PURPOSE OF BUSINESS ACTIVITY OF RUNNING SCHOOL AND NO INVESTME NTS WERE MADE OUT OF THE SAID LOAN. HOWEVER, THE COMMISSIONER NOTED THAT DURING THE YEA R UNDER CONSIDERATION, THE INVESTMENT PORTFOLIO OF THE ASSESSEE HAD INCREASED TO RS.22,50,667/- AS AGAINST INVESTMENT OF RS.14,98,998/- SHOWN IN THE PRECEDING YEAR. THE ASSESSEE FAILED TO BRING ON RECORD ANY EVIDENCE TO PROVE ITS CLAIM THAT INVE STMENTS WERE MADE FROM SEPARATE FUNDS AND NOT FROM THE LOAN FUNDS. IN THE CASE OF THE ASSESSEE WHERE MIXED FUNDS WERE AVAILABLE TO THE ASSESSEE, OUT OF WHICH BOTH THE BU SINESS ACTIVITIES WERE BEING FUNDED AND THE INVESTMENTS WERE BEING MADE IN VARIOUS TAX FREE FUNDS, THE PROVISIONS OF SECTION 14A R.W.S. 8D OF THE RULES WERE CLEARLY ATTRACTED. IN THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE ARE IN CONFORMITY WITH THE OBSERV ATIONS OF COMMISSIONER IN THIS REGARD AND WE ALSO UPHOLD THE EXERCISE OF JURISDICT ION BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT IN SETTING ASIDE THE ISSUE T O THE FILE OF ASSESSING OFFICER TO DECIDE THE SAME IN ACCORDANCE WITH THE LAW. UPHOLDING THE ORDER OF COMMISSIONER PASSED UNDER SECTION 263 OF THE ACT, WE DISMISS THE GROUND S OF APPEAL RAISED BY ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 27 TH DAY OF FEBRUARY, 2015. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 27 TH FEBRUARY, 2015 GCVSR COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT, AURANGABAD; 4) THE DR A BENCH, I.T.A.T., PUNE; 5) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE